CORRECTION | Huge funding gap for Johannesburg as Mashaba's revenue plan for city is blocked

By Claudi Mailovich - 30 May 2018 - 09:13

Huge funding gap for Johannesburg as Mashaba's revenue plan for city is blocked. Image: ARNOLD PRONTO

In the article headlined “Huge funding gap for Johannesburg as Mashaba’s revenue plan for city is blocked“‚ published on Wednesday May 30‚ we incorrectly reported that the Inkatha Freedom Party’s (IFP’s) Nonhlanhla Makhuba was recently dismissed by Johannesburg mayor Herman Mashaba.

It was former member of the mayoral committee (MMC) for housing Mzobanzi Ntuli‚ also from the IFP‚ who was removed from his position. Makhuba remains in her position as MMC for transport within the City of Johannesburg.

In the same article we described the EFF as the DA’s “coalition partner“. This is incorrect.

The EFF is not part of the coalition that governs Johannesburg. The errors were introduced in the editing process. Business Day regrets the errors.

CORRECTED TEXT

The EFF turned on Johannesburg mayor Herman Mashaba on Tuesday when they dealt his 2018-19 budget a huge blow‚ rejecting his planned tariffs and rates increases.

The decision by the metro’s kingmakers‚ the EFF‚ to abstain from voting on the tariffs led to the collapse of Mashaba’s revenue plan and created a huge funding gap in the coming financial year.

Mashaba said he was confident the impasse would be resolved within the next seven days‚ and said it was not “insurmountable“. He would get legal advice on the matter‚ adding that the situation was “a minefield of legal challenges“.

He said on Tuesday evening he would advise on the steps forward in the next 48 hours.

Rates and tariffs form a part of the metro’s mixed funding model‚ which includes loans and grants from the national and provincial governments.

It was the only one of the budget-related agendas on Tuesday that did not pass‚ as both the operational budget and the capital expenditure budget‚ as well as the integrated development plan‚ received the green light from the coalition government and the EFF.

All the agenda items are closely related‚ as the rates and tariffs play a crucial role in how the budget is funded. For example‚ City Power contributes about 40% of Johannesburg’s revenue.

It is unclear how the rejection of the rates and tariffs will be interpreted‚ as one analysis was that it could merely lead to rates and tariffs continuing on the same level as in 2017-18. This would leave a funding gap that would have to be filled.

The ANC’s Geoff Makhubo‚ however‚ said no rates and tariffs could be charged for 2018-19 if the rates and tariffs were not approved by council.

Makhubo said every revenue line item in the budget‚ except for grants‚ came from tariffs. “So the budget is underfunded. It’s unbalanced‚” Makhubo said.

The EFF gave Mashaba the votes he needed to win the mayoral position in 2016. On Tuesday‚ 25 EFF councillors abstained from the vote on the tariff increases. The abstentions led to the metro’s coalition partners only garnering 105 of the votes in council‚ with the opposition parties‚ including the ANC‚ mustering 113 of the votes.

Silumko Mabona of the EFF said his party “vehemently‚ unreservedly‚ unapologetically and ferociously” rejected the proposed increases in water‚ electricity‚ sewerage‚ sanitation and refuse removal.

Mabona said if the city wanted to close the gap created by funding being withheld from the national government‚ “the focus should be an accentuated focus on tracking businesses that evaded paying for services“.

He also said increasing the tariffs would help maintain the status quo in which the poor were funding the rich.

________________________

ORIGINAL ARTICLE

The EFF turned on Johannesburg mayor Herman Mashaba on Tuesday when they dealt his 2018-19 budget a huge blow‚ rejecting his planned tariffs and rates increases.

The issue of tariffs increases could further test a coalition already strained by the dismissal of Inkatha Freedom Party MMC Mzobanzi Ntuli by Mashaba last week.

The decision by the metro’s kingmakers‚ the EFF‚ to abstain from voting on the tariffs led to the collapse of Mashaba’s revenue plan and created a huge funding gap in the coming financial year.

The DA-led coalition now has until the end of June to get the other parties in the metro on the same page. The EFF has pledged it will do all it can to stifle passage of the increases.

Mashaba said he was confident the impasse would be resolved within the next seven days‚ and said it was not "insurmountable". He would get legal advice on the matter‚ adding that the situation was "a minefield of legal challenges".

He said on Tuesday evening he would advise on the steps forward in the next 48 hours.

Rates and tariffs form a part of the metro’s mixed funding model‚ which includes loans and grants from the national and provincial governments.

It was the only one of the budget-related agendas on Tuesday that did not pass‚ as both the operational budget and the capital expenditure budget‚ as well as the integrated development plan‚ received the green light from the coalition government and the EFF.

All the agenda items are closely related‚ as the rates and tariffs play a crucial role in how the budget is funded. For example‚ City Power contributes about 40% of Johannesburg’s revenue.

It is unclear how the rejection of the rates and tariffs will be interpreted‚ as one analysis was that it could merely lead to rates and tariffs continuing on the same level as in 2017-18. This would leave a funding gap that would have to be filled.

The ANC’s Geoff Makhubo‚ however‚ said no rates and tariffs could be charged for 2018-19 if the rates and tariffs were not approved by council.

Makhubo said every revenue line item in the budget‚ except for grants‚ came from tariffs. "So the budget is underfunded. It’s unbalanced‚" Makhubo said.

The EFF gave Mashaba the votes he needed to win the mayoral position in 2016. On Tuesday‚ 25 EFF councillors abstained from the vote on the tariff increases. The abstentions led to the coalition partners only garnering 105 of the votes in council‚ with the opposition parties‚ including the ANC‚ mustering 113 of the votes.

Silumko Mabona of the EFF said his party "vehemently‚ unreservedly‚ unapologetically and ferociously" rejected the proposed increases in water‚ electricity‚ sewerage‚ sanitation and refuse removal.

Mabona said if the city wanted to close the gap created by funding being withheld from the national government‚ "the focus should be an accentuated focus on tracking businesses that evaded paying for services".

He also said increasing the tariffs would help maintain the status quo in which the poor were funding the rich.